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The Healing US Job Market and How We All Forgot About the Great Recession
The January jobs report suggests the nearly nine-year-old economic expansion remains plenty capable of generating solid job growth: 200,000 last month and an average of 192,000 over the past three months. More interesting, it provided fresh evidence that a tightening labor market is also capable of accelerating wage growth. The 0.3% monthly rise in average hourly earnings, following an upwardly-revised 0.4% in December, pushed the 12-month rate up to 2.9%, the highest reading in nearly eight years.
All good enough for Capitol Economics to declare, “the acceleration in average hourly earnings isn’t an outlier.” And JPMorgan thinks it “now looks like the tightness in labor markets is showing through to a gradual acceleration in wage growth.” Indeed, it seems the Wall Street consensus is that before long, we’ll start seeing month-after-month of 3-handle jobless rates. And hopefully even stronger wage growth.
Which is all very odd given all the concern in recent years about how trade, technology, Obamanomics, and even the severity of the Great Recession meant the US job market was structurally and perhaps permanently damaged. Now it seems a simpler, though less sexy, answer was more likely the correct one: The Great Recession and Financial Crisis were so severe, it was going to take a good long while for labor markets to heal. Lots of slack needed to be soaked up. Lots, even more than we thought.